U.S. stocks rallied for a second straight session as investors geared up for some of the world’s biggest companies to report earnings this week. Traders also mulled whether the Federal Reserve will slow its pace of interest-rate hikes after assessing weak economic data that released Monday.
More than 80 per cent of stocks in the S&P 500 index closed in green on Monday, buoyed by gains in technology and health-care companies. The Nasdaq 100 also rose more than 1 per cent. U.S.-listed Chinese shares plunged after that nation’s equity index tumbled as President Xi Jinping solidified his power. Among the megacap companies slated to report earnings this week are Alphabet Inc., Microsoft Corp. and Meta Platforms Inc.
U.S. Treasury 10-year yields ended the session around 4.25 per cent. U.K. bonds posted some of their biggest gains on record as investors expect incoming Prime Minister Rishi Sunak to repair the damage caused by predecessor Liz Truss after her massive package of unfunded tax cuts roiled financial markets.
Earnings remain in focus in the U.S., with investors still on edge over whether companies that are among the key profit-growth engines for the S&P 500 can deliver profits with inflation crimping margins. Of the almost 20 per cent of companies that have reported so far, roughly 58 per cent posted positive surprises in both revenue and earnings per share, according to data compiled by Bloomberg. As the Fed attempts to stomp out inflation, latest earnings displaying resilience and showing few signs of recession may be making some investors uneasy on equities.
“Over the short-term, we think we can get some relief. The fact that earnings season has also been relatively strong is also helpful,” Andrew Sheets, Morgan Stanley’s chief cross-asset strategist, said on Bloomberg Television. “But the big picture — and I don’t think this changes — is that we still view this as a bear market rally rather than the start of a larger new bull market.”
Fed policy is also still a key focus for investors. Data on Monday indicated that Fed tightening is starting to hit the economy, with Purchasing Managers’ Index indicators showing contraction in the services and manufacturing sectors. Reports that the Fed may soon start reducing the size of its rate hikes had pushed stocks higher by more than 2 per cent on Friday. San Francisco Fed President Mary Daly’s comments on Friday also added to the tentative optimism. But some investors are still cautious in their expectations that the central bank is moderating its rhetoric.
“We are still agnostic as to whether the Fed really is going to pivot or be at the peak of its hawkish cycle,” said Lisa Erickson, senior vice president and head of public markets group at US Bank Wealth Management. “If you look at the underlying data, inflation remains sticky, particularly in services ex-housing, which can often be more persistent. So given the Fed’s dependence on the data, we’re not clear exactly again, when the Fed may truly begin to slow down.”
The central bank needs to maintain a balance between addressing inflation and reacting appropriately to any signs of slowdown in inflation, Erickson said.
Key events this week:
- Earnings due this week include: Apple, Microsoft, Exxon Mobil, Ford Motor, Credit Suisse, Airbus, Alphabet, Amazon, Bank of China, Boeing, Caterpillar, Cnooc, Coca-Cola, HSBC, Intel, McDonald’s, Mercedes-Benz, Merck, Samsung Electronics, Shell, UBS, UPS, Vale, Visa, Volkswagen
- U.S. Conference Board consumer confidence, Tuesday
- Bank of Canada rate decision, Wednesday
- ECB rate decision, Thursday
- U.S. GDP, durable goods orders, initial jobless claims, Thursday
- Bank of Japan policy decision, Friday
- U.S. personal income, personal spending, pending home sales, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
- The S&P 500 rose 1.2 per cent as of 4 p.m. New York time
- The Nasdaq 100 rose 1.1 per cent
- The Dow Jones Industrial Average rose 1.3 per cent
- The MSCI World index rose 1.2 per cent
- The Bloomberg Dollar Spot Index rose 0.4 per cent
- The euro rose 0.1 per cent to US$0.9873
- The British pound fell 0.2 per cent to US$1.1279
- The Japanese yen fell 0.9 per cent to 148.98 per dollar
- Bitcoin fell 0.8 per cent to US$19,341.76
- Ether rose 1.1 per cent to US$1,344.95
- The yield on 10-year Treasuries advanced three basis points to 4.25 per cent
- Germany’s 10-year yield declined nine basis points to 2.33 per cent
- Britain’s 10-year yield declined 31 basis points to 3.75 per cent
- West Texas Intermediate crude fell 0.5 per cent to US$84.66 a barrel
- Gold futures fell 0.1 per cent to US$1,654.20 an ounce
Consumer debt tops $2.36 trillion in third quarter, up 7.3 per cent from last year – BNN Bloomberg
Equifax Canada says an increase in borrowers helped push total consumer debt to $2.36 trillion in the third quarter for a 7.3 per cent rise from last year, even as mortgage volumes decline.
It says average non-mortgage debt rose to $21,183 for the highest level since the second quarter of 2020, with early signs of strain starting to show in auto loans and credit cards.
Overall non-mortgage debt came in at $599.9 billion for a 5.3 per cent climb from last year, and up 1.9 per cent from the third quarter of 2019, as the number of borrowers rose by 3.1 per cent.
Rebecca Oakes, Equifax Canada’s head of advanced analytics, says the rising debt stems from a combination of growth from immigration, pent-up spending, as well as increased borrowing as consumers feel the strain of higher living costs.
Credit card spending in the quarter was up 17.3 per cent from last year to an all-time high for the time period.
Average spending put on credit cards was almost $2,447, a 21.8 per cent jump from the third quarter of 2019.
There’s been an increase in credit card spending and new cards issued across all consumer segments, including the sub-prime segments, said Oakes in a statement.
She said there are some signs that borrowers are starting to have trouble covering the bills, with average payment rates for those who carry a balance down from a year ago, she said.
“Consumers have been making strong payments, but we are starting to see a shift in payment behaviour especially for credit card revolvers — those who carry a balance on their card and don’t pay it off in full each month.”
Delinquencies on auto loans have also started to trend up, especially those opened since late 2021, she said.
The overall rate of more than 90 day delinquencies for non-mortgage debt was 0.93 per cent, up from 0.87 last year, though insolvencies are still well below pre-pandemic levels.
New mortgage volume dropped 22.7 per cent in the quarter compared with last year and by 14.9 per cent compared with the third quarter of 2019. First-time home buyers are paying over $500 more for almost the same loan amounts as first-time buyers last year.
Overall insolvency rates are up from a year ago but from a relatively low starting point, and there are some areas of concern including a rise in consumer proposals by seniors, said Oakes.
“The true impact of interest rate hikes could be visible by the end of 2023.”
This report by The Canadian Press was first published Dec. 6, 2022.
Trudeau, Ford mark opening of Canada's first full-scale electric vehicle plant – CP24
The Canadian Press
Published Monday, December 5, 2022 5:06AM EST
Last Updated Monday, December 5, 2022 1:17PM EST
Prime Minister Justin Trudeau and Ontario Premier Doug Ford are celebrating the opening today of Canada’s first full-scale electric vehicle manufacturing plant.
Trudeau says electric delivery vans have started rolling off the line today at the General Motors CAMI production plant in Ingersoll, Ont., which has been retooled to build the company’s BrightDrop all-electric vehicle brand.
The prime minister was joined by Ford and the province’s Economic Development Minister Vic Fedeli to mark the milestone.
The provincial and federal governments each invested $259 million toward GM’s $2-billion plan to transform its Ingersoll plant and overhaul its Oshawa, Ont., plant to make it EV-ready.
The federal government says the Ingersoll plant is expected to manufacture 50,000 electric vehicles by 2025.
Canada intends to bar the sale of new internal-combustion engines in passenger vehicles by 2035.
This report by The Canadian Press was first published Dec. 5, 2022.
Food prices in Canada: Families to pay $1,065 more in 2023 – CTV News
Canadians won’t escape food inflation any time soon.
Food prices in Canada will continue to escalate in the new year, with grocery costs forecast to rise up to seven per cent in 2023, new research predicts.
For a family of four, the total annual grocery bill is expected to be $16,288 — $1,065 more than it was this year, the 13th edition of Canada’s Food Price Report released Monday said.
A single woman in her 40s — the average age in Canada — will pay about $3,740 for groceries next year while a single man the same age would pay $4,168, according to the report and Statistics Canada.
Food inflation is set to remain stubbornly high in the first half of 2023 before it starts to ease, said Sylvain Charlebois, lead author of the report and Dalhousie University professor of food distribution and policy.
“When you look at the current food inflation cycle we’re in right now, we’re probably in the seventh-inning stretch,” he said in an interview. “The first part of 2023 will remain challenging … but we’re starting to see the end of this.”
Multiple factors could influence food prices next year, including climate change, geopolitical conflicts, rising energy costs and the lingering effects of COVID-19, the report said.
Currency fluctuations could also play a role in food prices. A weaker Canadian dollar could make importing goods like lettuce more expensive, for example.
Earlier this year the loonie was worth more than 80 cents US, but it then dropped to a low of 72.17 cents US in October amid a strengthening U.S. dollar. It has hovered near the 74 cent mark in recent weeks, ending Friday at 74.25 cents US.
“The produce section is going to be the wild card,” Charlebois said. “Currency is one of the key things that could throw things off early in the winter and that’s why produce is the highest category.”
Vegetables could see the biggest price spikes, with estimates pegging cost increases will rise as high as eight per cent, the report said.
In addition to currency risks, much of the produce sold in Canada comes from the United States, which has been struggling with extremely dry conditions.
“The western U.S., particularly California, has seen strong El Nino weather patterns and droughts and bacterial contaminations, and that’s impacted our fruit and vegetable suppliers and prices,” said Simon Somogyi, campus lead at the University of Guelph and professor at the Gordon S. Lang School of Business and Economics.
“The drought is making the production of lettuce more expensive,” he said. “It’s reducing the crop size but it’s also causing bacterial contamination, which is lessening the supply in the marketplace.”
Prices in other key food categories like meat, dairy and bakery are predicted to soar up to seven per cent, the researchers found.
The Canadian Dairy Commission has approved a farm gate milk price increase of about 2.2 per cent, or just under two cents per litre, for Feb. 1, 2023.
“The increase for February is reasonable but it comes after the unprecedented increases in 2022, which are continuing to work their way through the supply chain,” Charlebois said of the two price hikes of nearly 11 per cent combined in 2022.
Meanwhile, seafood is expected to increase up to six per cent, while fruit could increase up to five per cent, the report said.
Restaurant costs are expected to increase four to six per cent, less than supermarket prices, the report said.
Rising prices will push food security and affordability even further out of reach of Canadians a year after food bank use reached a record high, the report said.
The increasing reliance on food banks is expected to continue, with 20 per cent of Canadians reporting they will likely turn to community organizations in 2023 for help feeding their families, a survey included in the report found.
Use of weekly flyers, coupons, bulk buying and food rescuing apps also ticked up this year and is expected to continue growing in 2023, the report said.
“We’re in the era now of the smart shopper,” said Somogyi, also the Arrell Chair in the Business of Food.
“For certain generations, it’s the first time that they’ve had to make a list, not impulse buy, read the weekly flyers, use coupons, buy in volume and freeze what they don’t use.”
Last year’s report predicted food prices would increase five to seven per cent in 2022 — the biggest jump ever predicted by the annual food price report.
Food costs actually far exceeded that forecast. Grocery prices were up 11 per cent in October compared with a year before while overall food costs were up 10.1 per cent, according to Statistics Canada.
“We were called alarmists,” Charlebois said of the prediction that food prices could rise seven per cent in 2022. Critics called the report an “exaggeration,” he said.
“You’re always one crisis away from throwing everything out the window,” Charlebois said. “We didn’t predict the war in Ukraine, and that really affected markets.”
This report by The Canadian Press was first published Dec. 5, 2022.
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